Low oil prices hurting Chinese energy companies too

February 5, 2015 | By Doug Peeples

The repercussions of the continuing oil price slump have been underscored in a number of ways, affecting both majors like BP and Royal Dutch Shell in addition to smaller companies. Layoffs, drastically cut budgets and capital investment, falling stock value and cancelled or delayed exploration and drilling projects have been the most prominent. Now, China's energy companies are beginning to acknowledge the pinch.

China National Offshore Oil Corp. (CNOOC), the largest offshore crude oil and gas producer in China has followed suit to become the first large Chinese energy company to announce it too will cut its capital spending by 26-35 percent, according to Reuters. Analysts had earlier anticipated a much smaller reduction. CNOOC is involved in oil and gas exploration, development, production and sales in several offshore regions of China and in other locations throughout the world, including North America.

In a statement, CNOOC chief financial officer Zhong Hua said, "In response to challenges from falling oil prices, we will control our costs and strive for the effective implementation of our capital expenditure plan in order to improve the overall performance of the company." The company's shares have reportedly lost over 20 percent of value over the last several months.

However, CNOOC will not at this point stop its North American oil sands and shale gas projects.

More Chinese companies are expected to make similar budget cutting announcements late next month. It is interesting to note that while China is a net oil importer, low oil prices have not been as advantageous as expected.

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